Merryn's Blog

Why turn energy companies into tax collectors?

Collecting taxes and distributing subsidies shouldn't be the job of Britain's energy companies, says Merryn Somerset Webb. That's what the state is for.

One of the things we didn't get on to in the Great Debate was energy prices and how they should be kept low.

My guess is that the audience (who seemed prone to wanting to nationalise everything) would have been keen on windfall taxes, price freezes and state takeovers. But it would seem to me that the best thing we could do is to stop using the energy companies as an extension of the state.

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Look at the extra charges on your bill. There are various green charges and also various social charges. So you pay for the government-mandated subsidies to the renewable energy sector via your bill (£112 on average a year), and you also pay for rebates on energy to low income households (£11 a year), and for contributions towards insulating their houses too.

All these things might be fine in one way or another. But they have nothing to do with the energy companies. You want to subsidise energy for the old and the poor? That's what the welfare state monster is for. We have it. So why don't we use it every time we find a new reason to redistribute cash from rich to the poor?

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The same goes for the subsidies. They weren't mandated by the energy companies, so why make the energy companies collect and distribute them? This kind of regressive taxation (green subsidies tend to take from the masses and get paid to landowners) is surely the job of the state.

One of the things that people most want from the tax system in the UK is simplicity and transparency. Inventing new taxes and then trying to hide them behind energy company bills isn't exactly moving us along the right path.

Shifting the taxes off energy bills won't make their final cost any lower, but it will at least return their administration to the correct place. It would also make our energy bills just a tiny bit easier to understand and crucially be rather more honest.

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